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Equity Designed With Retirement In Mind

A challenging environment for equity returns, and the potential for more risk, makes quality low volatility a good fit for retirement investing.

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Saving and investing for retirement requires participants to be steadfast in their contributions and stay the course when market volatility tests even the most patient investors. Unfortunately, market volatility is inevitable and has been increasing in frequency and magnitude. In addition, return expectations are much lower, which will require participants to save more or invest differently to reach their retirement goals. With this backdrop, it may be prudent to consider incorporating an equity strategy that can deliver returns and lower overall risk to address these investing challenges participants will face in the future.


Most investors have been fortunate over the last 20 years in their investment outcomes. Whether they have invested their savings into stocks, bonds or a mixture of both, investment returns have been robust with a balanced 60/40 equity/bond portfolio gaining 232% cumulatively since 2000, even after including the recent COVID-19 induced market drawdown.1 But with stocks widely viewed as at or above average historical valuations and interest rates hovering near all-time lows, investors may find that a traditional 60/40 portfolio will not accomplish their retirement goals in today’s unique market environment.

We expect U.S. stock returns to average 4.7% annually over the next five years, versus the 10.8% average growth of the last five years.2 This is a significant drop that may cause investors to reevaluate how they can achieve their retirement goals. The two most obvious solutions to this low-return environment are to either save more or allocate a larger percentage of retirement assets to riskier investment options, such as equities. However, we know both of these solutions may seem unpalatable to investors during these uncertain times, especially investors nearing or in retirement.

160% equity and 40% bond portfolio represented by the Russell 1000 index and Barclays US Aggregate Bond Index, respectively. Total return is calculated from 01/01/2000 through 6/30/2020.

2Northern Trust Asset Management, Bloomberg. Annualized return data in local currency from 6/30/2015 to 6/30/2020. Past performance does not guarantee future results.